Joining in a Corporation’s Loan as a Consumer – How much Protection

The BGH (I ZR 208/06 of July 24, 2007) had to decide the question whether joining the loan of a corporation as a consumer is subject to the general rules of civil law or the special rules for consumer. These consumer rules set up high protection standards to the benefit of the consumer.

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In 2000, the defendants founded the QU GmbH & Co. KG. The company’s operational assets for opening the company were funded by a bank loan of DM 500,000. The bank expected payments in monthly installments. The loan contract did not contain any details to the total sum of the loan (i.e. including all costs) and the “effective annual interest rate”. No. 5 of the contract (“Securities”) stipulates that next to the company itself also the wives of the shareholders will jointly be liable for paying the loan back. The contract was signed by all as “borrowers”. After some time, the company ceased paying back the debt so that the bank canceled the contract and sued the wives for the outstanding sum. The defendant argued that the contract was null and void because it did not meet the standards of consumer loans.

The Federal Court of Justice held that, exclusively in relation to the wives, the loan was null and void because it infringed the consumer protection rules. These rules are there to protect the consumer when taking out a loan and this especially when signing a contract, being in default, and when winding up distressed. They are codified in §§488BGB.

These rules are also applicable even if a consumer joins in a corporate credit. Important is exclusively the consumer capacity, as codified in §13 BGB. The wives were without any question consumers as they were not in any manner engaged in holding shares or running the corporation. “Joining” in a loan might not be formally “taking out” a loan but following ruling case law it is considered to be equal. Therefore, these rules are applicable and establish the higher protection for consumers. This need for protection is independent of the capacity of the actual borrower. The wives were considered to only have become subsequent borrowers or better said only a security in person. They were not the actual borrowers – in contrast to the husbands and the company itself.

The BGH also pointed out again that a shareholding and managing director (Gesellschafter-Geschäftsführer) of a corporation is not a business person (§14 I BGB) but a consumer (§13 BGB).

This judgment clearly shows that consumers enjoy high degree of protection in Germany. Even if a consumer joins in a corporate loan, the Verbraucherkreditgesetz remains applicable – but only for the consumer.

Published on the old CMS: 2008/1/16Read on the old CMS till November 2008: 353 reads